Suppose we are planning to buy a company with the following forecasts:

Year	1	2	3 & afterwards
FCF	$5 million	$ 5.5 million	3% constant growth rate
Debt level	$50 million	$35 million	Constant debt to equity ratio. Capital will be 50% debt and 50% equity, wd = ws = 0.5.

The cost of debt is 5% The cost of equity is 20% The tax rate is 40% The company has 15 million shares outstanding The current stock price is $2.05 The company is currently holding no financial assets. The company has $3,000,000 in debt. WACC, the cost of capital, is equal to 11.5% RSU, the cost of unlevered equity, is equal to 12.5% Calculate the value of the debt tax shield. Calculate the horizon value of the target. Calculate the value of operations. What is the highest offer price we can make? Is the acquisition feasible?